European Commission Publishes Legislative Proposal for a Financial Transaction Tax

On 28 September 2011, the European Commission published its legislative proposal for a Council Directive on a financial transaction tax in the EU. In his annual State of the Union Address in Strasbourg, José Manuel Barroso, the President of the European Commission, commented: "In the last three years, Member States – I should say taxpayers – have granted aid and provided guarantees of €4.6 trillion to the financial sector. It is time for the financial sector to make a contribution back to society. That is why I am very proud to say that today, the Commission adopted a proposal for the Financial Transaction Tax."

As proposed, the impact of the tax would be far from uniform across EU Member States and could adversely affect international competitiveness. Indeed, the UK has already expressed its objections to any financial transaction tax applied at a less than global level, and for good reasons. It remains to be seen whether, without the support of the UK and potentially other EU Member States, the legislative proposal will achieve anything beyond keeping the possibility of a financial transaction tax on the policy agenda, in the EU and internationally.

This note provides an overview of the financial transaction tax proposed by the European Commission.